When comparing banks and mutual funds,
A)mutual funds have more liquidity risk than banks because all shareholders share the loss of value on a pro rata basis.
B)mutual funds have less liquidity risk than banks because all shareholders share the loss of value on a pro rata basis.
C)mutual funds have more liquidity risk than banks because all shareholders have the ability to withdraw their money on a first-come first basis.
D)mutual funds have less liquidity risk than banks because all shareholders have the ability to withdraw their money on a first-come first basis.

Question

Quizplus · Accepted Answer

Mutual funds have less liquidity risk because losses are shared among all shareholders, reducing the impact on any single investor, unlike banks where depositors can withdraw funds on a first-come, first-served basis, potentially leading to liquidity issues.

When Comparing Banks and Mutual Funds